The reformists had suffered significant setbacks in recent months. More newspapers were closed and a member of parliament who had challenged the legitimacy of the hard-line judiciary was jailed. Last week, they were showing signs of regaining some of their lost ground, when Bush's saber-rattling speech distracted them from the business at hand by forcing them to wave the flag with their rivals.

One of the reasons for the shock felt by many Iranians at Bush's speech was the widespread perception here that relations between the U.S. and Iran were improving. Iran had a sympathetic reaction to the Sept. 11 attacks: President Khatami sent a message of condolence to the people of America, which was a first by an Iranian president. It took a neutral stance in the U.S.-led war against al-Qaida. And as Afghanistan's western neighbor and a close ally of the anti-Taliban forces, it played an important role in forming the interim administration of Hamid Karzai at the Bonn conference. All these were seen as hopeful signs auguring a rapprochement between the old foes.

The fact that none of these gestures prevented Bush from naming Iran as an "evil" enemy may have disappointed reformers, but hard-liners may actually be heartened, said Hermidas Bavand, a lecturer in international relations. "There are certain political wings in Iran who are glad about a return to crisis and slogans," he said. Bavard deplored losing the opportunity for reconciliation offered by Sept. 11, but believed that there is room for a solution -- if Iran reacts calmly. "Emotional reactions must be avoided. A short period of silence by Iran is required. We should ignore the fuss. We should also invite the International Atomic Energy Agency to come and inspect our sites to show our goodwill," he said.

The Palestinian issue, which has topped Iran's foreign-policy agenda since the revolution, remains the main point of contention with the U.S. The Israeli seizure of the Karine A, a ship containing a cargo of arms that Israel and the United States claim Iran was shipping to Yasser Arafat's Palestinian Authority, and intense Israeli lobbying are seen as the decisive factors that led Bush to place Iran in the "evil" category.

Iran has denied involvement in the Karine A, but has made no secret of its support for the Palestinians, for whom many ordinary Iranians feel sympathy. Iran's position is that Israel is an illegal occupying power in the West Bank and Gaza, and therefore that militants who battle Israel are not terrorists but resistance fighters. President Khatami, who is dubbed by Iranians "a talk-therapist" because of his insistence on solving all problems through dialogue, has proposed a U.N. summit to discuss the definition of terrorism, with the purpose of bringing such issues to the table.

As for the allegations that Iran has been meddling in the affairs of Afghanistan or harboring al-Qaida fugitives, officials here categorically deny them. Foreign Minister Kamal Kharrazi told reporters in a news conference Wednesday: "It is known to all that we played an effective part in helping establish this government in Afghanistan. It is not logical for us to weaken a government we have worked so hard to bring about." He also asked the U.S. to give Iran any information it has about al-Qaida fugitives so that the Iranian authorities could try to track them down, a statement interpreted as a gesture of goodwill.

At the special Friday prayers, Ayatollah Ahmad Janati reinforced that comment, pointing out that it would make no sense for Iran to be sheltering al-Qaida fighters when Iran has been battling them for so many years. The Taliban regime and the Islamic Republic were enemies long before Sept. 11, with matters reaching bottom when eight Iranian diplomats and a journalist were murdered in Mazar-e-Sharif in 1998.

Despite the furor over Bush's speech and the sloganeering, the prevailing mood among Iranians is pragmatic. Most believe that the administration is actually divided over Iran policy and that despite Bush's tough talk, the status quo will prevail. There is also a widespread belief that Bush's "axis of evil" speech was intended for internal U.S. consumption and has as much to do with justifying his request for a massive increase in the defense budget and distracting the public's attention from the Enron mess as it does with Iran's alleged role in supporting terrorism.

The immediate palliative for the present situation, according to the Iranian media, seems to be Iran's relation with the Europeans and their lack of support for Washington's "axis of evil" ploy. Bijan Khajehpour, a consultant who works with foreign businesses in Iran, thinks the new snub from the U.S. could have positive effects. "Iran will now have to make a concerted effort in improving relations with Europe," he said. "We can no longer keep Europe at arms length while we wonder about relations with the USA."

Hermidas Bavand is less optimistic: "Europe may distance itself initially from the U.S. on this, but ultimately they will follow. A solution must be found."

In the meantime, most Iranians' main concern remains not Bush's threats but the wrangling between the reformists and the hard-liners. On Wednesday, most papers had reverted to carrying mainly domestic news. How the new American hard line will play out in the end is impossible to say, but for the time being, some find irony in the fact that what is good for a right-wing American president is also good for the right-wing Iranian administration. In the words of journalist Saiid Layaz, "For some bizarre reason, whenever the USA decides to talk about Iran, it accidentally ends up benefiting the hard-liners."

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